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    Question

    Liability for the drawer for the bill discounted is a:

    A Contingent liability Correct Answer Incorrect Answer
    B Long term liability Correct Answer Incorrect Answer
    C Short term liability Correct Answer Incorrect Answer
    D Current liability Correct Answer Incorrect Answer

    Solution

    When a bill is discounted from bank, the drawee becomes liable to the bank. However, on the due date if the drawee is unable to make the payment the bank can recover the amount from drawer. therefore, when drawer discounts a bill with bank it becomes a contingent liability for the drawer.

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